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Are extended warranties on vehicles current year expense?

Client purchased a new vehicle in 2018. She bought the extended warranty as well as credit insurance on the loan. Are these all current year vehicle expenses or should they be split over the loan term? ie. 7800 expense / 6 years = 1300 current expense each year?

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I would venture that most accountants, including myself, just take the bottom line amount of a vehicle sales agreement (minus HST and a new license plate) and just enter the whole thing as a capital cost of the vehicle. Technically, that isn't right and the extended warranty is NOT a part of the cost of the asset. The total warranty cost, assuming it is paid up-front, should be spread over the life of the warranty period and claimed on a straight line basis. The credit insurance tends to be claimed separately along with the annual interest portion on an annual basis.

This seems to be one of the hazards of being the tax preparer for a business and not the accountant for the business. Many of the small business clients nowadays keep their own records on QuickBooks or Sage so my job is only taking care of the tax side of things. I do keep working papers for every file, but when it comes to trying to keeping track of multi-year expenses paid up front it gets to be more paperwork than is worth the effort. And what if the business changes tax preparation firms mid-stream? Who is going to keep track of what?

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Thanks for the reply! I do her taxes every year, so I think I'll use straight line for both the warranty and the credit insurance (insurance was paid upfront). Thanks again! I'm sure I'll have other questions - your collaboration is appreciated

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